Western Banks Help Fund Blacklisted Oligarchs Charity

A powerful Russian businessman who has been under financial sanctions for nearly a decade has nevertheless used American and European banks to raise money for orphanages in a region that is at the heart of the Kremlin’s program of deporting Ukrainian children to Russia, records show.

The businessman, Konstantin Malofeyev, is among Russia’s most prominent conservative voices and a champion of the resettlement efforts, which prosecutors at The Hague have labeled a war crime. He calls for a return of the Russian Empire, and has repeatedly denied the existence of a Ukrainian identity.

Mr. Malofeyev has been cut off from most Western financial systems since 2014, when the Treasury Department and other international regulators accused him of financing Russian proxy forces inside Ukraine. He has denied that.

Mr. Malofeyev, though, has continued to use his charity, the St. Basil the Great Foundation, to raise money for orphanages in the Russian-occupied Donbas and Zaporizhzhia regions. In an interview, Mr. Malofeyev said he did not know whether those orphanages hosted Ukrainian children who had been forcibly relocated, but said the resettlement effort had been unfairly demonized.

“Small children, deported by Russians from their families?” he said, comparing it to the fairy tale “Cinderella.” “All of this is fake.”

The New York Times has seen records confirming a recent transfer of American dollars to the charity’s account in the Moscow branch of OTP Bank, a Hungarian bank.

The exact path those dollars took is unclear. OTP said it would not discuss its customers, citing confidentiality policies, but said it was “an ethical and law-abiding institution following the principle of zero-tolerance in respect of any kind of crimes.”

The charity’s website says that international donations are routed through Bank of America and Deutsche Bank. But spokesmen for both companies said that neither currently do business with OTP’s branch in Moscow.

One of the orphanages sponsored by Mr. Malofeyev’s foundation is identified as a “high probability” location of transferred Ukrainian children, according to a database created by a team of independent Russian analysts. The Times could not corroborate that.

The St. Basil the Great Foundation itself has not been blacklisted by American or European authorities. But under the Treasury Department’s “50 percent rule,” sanctions against Mr. Malofeyev would extend automatically to any entity in which he is a majority owner. The European Union has similar rules for organizations in which blacklisted people have “decisive influence.”

Mr. Malofeyev founded the foundation in 2007, and is the chairman of its board. He is listed as its chief executive officer in the official Russian legal registry.

It is not clear whether Treasury Department rules would cover Mr. Malofeyev’s foundation. His ability to move money using Western banks is an example of how sanctions — the West’s go-to punishment against Russia — rely largely on enforcement by banks, and can be a matter of interpretation.

Spokesmen for Bank of America and Deutsche Bank said the banks followed all sanctions rules. The Treasury Department declined to comment. European regulators did not comment, but said it was up to national governments to enforce the sanctions.

Russia illegally annexed parts of Ukraine last year, and Mr. Malofeyev repeated the Kremlin’s claim that all children from that region “belong” to Russia.

Since Russia’s full-scale invasion of Ukraine, children in these areas have themselves become a battleground. Some children have described a wrenching process of coercion, deception and force as they were moved to Russia, placed in state institutions or foster homes and subjected to re-education. Following these reports, the International Criminal Court issued an arrest warrant in March for President Vladimir V. Putin and Maria Lvova-Belova, the official leading the relocation effort.

Mr. Putin publicly thanked Mr. Malofeyev in February for helping “the children of the Donbas.” And Ms. Lvova-Belova mentioned him at the same event when discussing businessmen who have supported her efforts.

Mr. Malofeyev’s foundation has, since 2014, helped transport children from Russian-occupied areas to Moscow hospitals. Ukraine blacklisted the charity in 2015 and has renewed that designation five times, most recently in 2021.

In January, the foundation and Ms. Lvova-Belova announced a project called “Happy Childhood” to raise money for “children and families with children” in “new regions of Russia,” according to the official news release. In less than a month, it raised about $265,000. In February, she and Mr. Malofeyev toured the occupied territories together, meeting with self-appointed heads of regions.

Mr. Malofeyev was livid at the news coverage of the warrants.

“This story is absolutely immoral,” Mr. Malofeyev told The Times earlier this year. “If they were accused of, for example, that the children became ill, that the children were suffering, then it would be possible to talk about it. But the children are fine. The children have found their families.”

According to an official news release, about 450 children and young adults are in the care of orphanages financed by Mr. Malofeyev’s foundation. He said the charity also supported Russian families in the Donbas region that have recently adopted children.

“There are families with multiple kids, that have adopted kids who are not theirs,” he told The Times.

“The St. Basil the Great Foundation is a back door for Malofeyev and Russia to continue a foreign influence operation,” said Jelle Postma, a former Dutch intelligence officer who now leads Justice for Prosperity, a research institution focused on foreign interference.

Mr. Postma wired money in dollars to the foundation to test the donation system and shared the documentation with The Times.

Last year, the Justice Department indicted Mr. Malofeyev on charges of attempting to evade sanctions. It was the first criminal case brought by the Biden administration’s multiagency task force set up to target illicit Russian money.

Earlier this year, the Justice Department announced that it would use $5.3 million that it had seized from Mr. Malofeyev to help rebuild Ukraine.

“While this represents the United States’ first transfer of forfeited Russian funds for the rebuilding of Ukraine, it will not be the last,” Attorney General Merrick B. Garland said in a statement.